Author: TOM MITCHELHILL, COINTELEGRAPH; Translator: 松雪, Blocking
According to reports, US prosecutors and IRS agents are investigating cryptocurrency traders and fund managers who are suspected of illegally benefiting from Puerto Rican tax breaks.
Investigators are currently bringing civil and criminal cases against some hedge fund managers, cryptocurrency traders, and other US wealthy individuals who may have lied about residency and income key factors to unfairly obtain tax breaks, according to Bloomberg on June 12.
US officials are also conducting a deep investigation into lawyers and accountants responsible for promoting the island’s tax plan, and it is expected that at least two criminal investigations will result in charges in the near future. Prosecutors are investigating charges of conspiracy and wire fraud.
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Lawyer Carlos Ortiz recalled conversations with US federal prosecutors, saying that prosecutors are working with “IRS agents” and Puerto Rican officials.
“The message conveyed is that the noose is tightening.”
Since Puerto Rico introduced new tax policies in 2012, more than 5,000 Americans have moved to the country, one of the benefits being the saving of federal income tax.
Puerto Rico’s tax policy gives individuals 100% tax-free dividends, 60% municipal tax exemption, and no federal tax on income earned in the region.
In addition, more than 3,600 companies can exempt dividend tax on earnings and profits, and only need to pay 4% export tax.
Although the tax incentives here are one of the most generous in the world, the requirements for using these incentives are quite strict.
In order to qualify for tax breaks, new residents must be able to prove that they live on the island for at least 183 days a year and that the territory is their “tax home.”
According to lawyers familiar with the system, these strict rules have led many people to falsify numbers and cheat on tax returns.
Notable residents who have moved to Puerto Rico for tax reasons include gold bug Peter Schiff and cryptocurrency investor Michael Terpin. In July 4th, Puerto Rican regulators closed Schiff’s bank for failing to meet minimum capital requirements.
On May 19th, Terpin spoke at the annual Bitcoin conference in Miami, praising Puerto Rico as “the only place you can go and not have to pay taxes globally without giving up your US citizenship.”
Unlike some, Terpin doesn’t seem too worried about strict tax policies:
“I’ve been told that everyone gets audited, which is great. My records are very accurate. I put them through a tax lawyer and a registered accountant, plus two bookkeepers. So come at me, bro, I’m not afraid of an audit.”
While the island’s wealthy residents appreciate the tax breaks as it attracts top fund managers and entrepreneurs to the island, the tax plan has faced protest, with demonstrators calling the new super-rich residents “colonizers” of low-tax rates, which has driven up the cost of living.